India's Digital Lending Reset
India’s digital lending sector is currently in a reset mode as the contracting GDP, moratorium, & Covid-19 has forced companies to adopt digital, review credit models & more. This playbook takes a deep dive into the challenges and new pathways adopted by digital lending startups for survival and scale!
The pandemic may have forced lenders to go digital for B2B loans, eligibility criteria and risk, and approval process, but that does not guarantee that more loans will be processed because there’s a glaring hole in the middle of the Indian B2B credit market — lack of data.
While things like video KYC have helped digital NBFCs and lending tech startups to authenticate potential customers, this is still not good enough to get loans approved. For business loans, the criteria vary from business to business and sector to sector. So how can digital lenders hope to keep up with all these various criteria and will businesses seeking loans even have supporting documents?
Envisioning a paperless future, the account aggregator (AA) system promises to bring low-cost validated data to every lender in the market — at once solving the data problem. If in July 2019, Nandan Nilekani formally introduced the concept of account aggregators, in July this year, Nilekani has further introduced OCEN (Open Credit Enablement Network) developed by iSPIRT Foundation which would work as a common language between LSPs (Loan Service Providers) and lenders.
At the Global Fintech Festival, Nilekani said,